MegaFon debut fails to ring bells for investors

SHARES in MegaFon, the mobile operator controlled by Russia’s richest man, made a tough debut in London and Moscow yesterday in what continues to be a difficult market for Russian listings.

Despite pricing its offer at the bottom of a previously indicated range, MegaFon shares immediately fell amid what many described as scepticism among emerging market investors. In addition to broader doubts over growth potential in the slowing Russian economy, analysts said investors also appeared reluctant to swap out their holdings in MTS, MegaFon’s larger rival.

The company’s $1.7 billion (£1.06bn) offering is the biggest by a Russian group since aluminium producer Rusal’s £2.2bn flotation in Hong Kong nearly three years ago.

The company – Russia’s second-largest mobile operator – was formed in part by the 2002 merger that created TeliaSonera, Sweden’s largest phone company. TeliaSonera’s combined Russian assets became what is now MegaFon, with the Nordic firm retaining a 35.6 per cent stake.

TeliaSonera is selling down its stake to 25 per cent as per an agreement earlier this year with Alisher Usmanov, MegaFon’s controlling investor and a shareholder in Arsenal FC.

However, the process was delayed after Goldman Sachs withdrew as lead bank on the IPO amid concerns over corporate governance at MegaFon. This led to an extended review by the Financial Services Authority, forcing MegaFon to briefly postpone its offering.